Australia-China Relations: A Long-Term View

I am both delighted and honoured to be here today at one of Australia's great centres of research and learning, the Australian National University.

It is hard to imagine a more appropriate host for a speech on Australia-China relations than the ANU's China Institute.

The Institute makes an outstanding contribution to Australia's scholarship on China and the promotion of Sino-Australian academic links.

My subject today is the Australia-China relationship, a subject of great interest, significance and challenge, to both China and to Australia.

Our relationship has been growing in complexity and prominence.

This process began over thirty years ago, the product of far-sighted leadership in both capitals.

Over the years, our two countries have both reformed our economies and expanded our engagement in the Asia-Pacific.

This has accelerated in the past decade, at a time when the focus of global economic, strategic, political and military influence is shifting to our part of the world, the Asia-Pacific.

The Australia-China relationship is becoming one of Australia's most important, as well as one of our most high-profile.

The scale and ramifications of the relationship are, however, often under-appreciated.

Much recent commentary on the Australia-China relationship has tended to focus on tensions caused by individual issues, and from those tensions to extrapolate negative judgments about the state of the broader relationship.

This is a narrow approach and one that overlooks a much more enduring picture.

Today I want to do three things:

to set out the shared interests that underpin the relationship;

to explain the context within which we handle the differences that arise; and

to outline the directions we need to take for this relationship to reach its potential.

China's economic growth began from a very low base, and still has a way to go.

China has been the fastest-growing major economy in the world over the past 25 years, with annual growth averaging 10 per cent.

This domestic Chinese economic growth has both relied on and spurred corresponding growth in Australia-China bilateral trade.

If we look back to 1980, just after China's economic reforms began, our two-way trade in goods and services with China was under $1 billion, or 2 per cent of Australia's total trade.

In 1995, this reached $8 billion, or 4 per cent of Australia's total trade, a substantial increase.

The really impressive leap is that by 2008, two-way trade had surged to $74 billion, or 13 per cent of Australia's total trade, seeing China knocking on the door of being our largest trading partner.

This year China now ranks beside Japan as our most substantial export market.

These two countries combined account for a massive 40 per cent of Australia's exports.

This growing trade is of course important to Australia.

It is also important to China, which increasingly depends on a diverse array of imports of raw materials, energy and food.

There is mutual benefit, as well as mutual dependence.

In addition to trade in goods and services, two-way investment links are an increasingly prominent element of our economic relationship.

This is a relatively new development and still under recognised.

It should come as no surprise, as it follows a well worn path.

In the seventies and eighties, we saw the same pattern set first by Japan and then emulated by Korea, with success in trade naturally leading to success in investment, with the result being mutual benefit and closer economic integration.

China will prove to be no exception.

Australia maintains a longstanding, consistent, open and welcoming stance towards foreign investment, from wherever it comes, including from China.

Historically, Australia has been an importer of capital, as well as people. Our future growth relies on continued openness to foreign investment.

Australia has made itself a well-developed and prosperous country by being both a great trading nation and an attractive place for foreign capital investment.

Despite a contrary view sometimes expressed in Australia, the facts tell a very positive story about Australia's welcoming policy and posture towards investment from China.

Since November 2007, the Australian Government has approved over 100 investment proposals from China to acquire Australian businesses. 96 were approved unconditionally.

The current Government has approved Chinese investment, including Chinese investment in both business and non-business sectors, of over $38 billion.

We welcome this investment.

Chinese investment, like any other investment from any other country, strengthens the Australian economy and supports Australian jobs.

Investment proposals from China's state owned enterprises are subject to the review processes and are judged on national interest considerations in accordance with Australia's foreign investment legislative and regulatory requirements.

State owned enterprises and sovereign wealth funds from all countries are treated in exactly the same way, as the Treasurer has made clear through the publication of the relevant Foreign Investment Review Board guidelines.

China, of course, maintains its own foreign investment review arrangements to which Australian and other investors are subject.

It is important to put Chinese investment in Australia in perspective.

At the end of 2008, China was ranked 15th among Australia's largest investors, behind the United Kingdom, the United States, Japan, Singapore, Switzerland, Germany, the Netherlands, France and New Zealand.

Chinese dialects are the second most commonly spoken language in Australia after English.

China is an increasingly important source both of tourists and migrants, and provides almost one quarter of all international student enrolments in Australia, more than 125,000 in 2008.

China is also a destination for increasing numbers of Australian businesspeople and young professionals looking to launch their careers.

Australian institutions of all kinds, universities, scientific academies, cultural and sporting groups, professional associations and non government organisations, are forming partnerships with their counterparts in China.

In addition to economic complimentarity and people-to-people links, there is also an international dimension to our shared interests.

Our two countries have extensive and growing interests in supporting stability and prosperity in our region and cooperation on global challenges.

It is hard to think of a single international issue of importance to Australia where China is not a key player on the world stage, from climate change to regional security to the global financial crisis.

The next couple of months is a crucial time for international consideration of climate issues.

My colleague, the Minister for Climate Change and Water, Penny Wong, was in Beijing the week before last for discussions on strengthening bilateral cooperation on climate change and encouraging a good outcome at Copenhagen.

Australia is also working closely with China in the G20.

The designation of the G20 Leaders' process as the premier forum for international economic cooperation was an historic moment for global governance, bringing together the leaders of the world's major developed and developing economies.

On regional security issues, China is a key protagonist, for example on North Korea and in regional groupings such as the ASEAN Regional Forum.

As we know, the international community faces great challenges.

Australia and China have a shared interest in working together and with others in the international community to meet these challenges.

Policy context

Let me now set out the policy context or framework within which we approach this important bilateral relationship.

The framework has two important elements.

First is a frank acknowledgement of the realities of the two sides, the differences that are there or may arise.

Second, is a strong commitment to manage such differences in a straightforward and constructive way, with an eye to the long term.

Australia's foreign policy approach to China is absolutely grounded in Australia's national interests and reflects Australia's values and virtues.

It recognises that we have different histories, different societies and different political systems, as well as differences of view on important issues.

Those differences saw less attention in the past, when our relationship was less well developed and our contacts more limited.

But now that our two countries are dealing with each other more closely, those differences are much more noticeable and much more scrutinised than in the past.

We have to manage them calmly and appropriately.

Australia is a robust Parliamentary democracy.

Our system of government requires public debate and spirited disagreements in order that policy alternatives can be weighed up, decisions reached, and public views formed, not just by Governments or Parliaments but by the Australian people.

That is not the way things work in China.

There is of course considerable policy debate in China, but it is not often played out in the open.

As a rule, China places greater priority on public unity and consensus. When public disagreement occurs, it is generally regarded with much more seriousness than is the case in Australia, where it is often regarded as a healthy and positive aspect of policy making.

When a view is reported in the official media in China, it is invariably seen as a reflection of national policy.

This is an important difference and both sides have a responsibility to respond in a calm and measured way to such public debate or media coverage.

While we recognise such realities, we should not concentrate on them to the point that they distort an appreciation of the broader relationship.

The important point is that notwithstanding such differences, both Australia and China are firmly committed to a productive and mutually beneficial relationship.

This has been underpinned for more than three decades by Australia's early diplomatic recognition of the People's Republic of China by the Whitlam Government in 1972, at a time when it was not necessarily fashionable to do so.

This recognition also came with the adoption of a One China policy, a commitment which has been adhered to consistently on a bipartisan basis through four changes of Government and six Prime Ministers.

While recently this bipartisanship may have appeared tenuous to some, it is demonstrably in Australia's national interest that it continues.

Australia welcomes the similar level of political commitment from China.

On 3 September this year, China's Foreign Ministry spokesperson Ms Jiang Yu said that a sound Australia-China relationship was "in the fundamental interests of both countries and required efforts from both sides, respecting and taking into consideration each other's interests and concerns".

She added that we "should properly handle sensitive issues and safeguard the overall interests of bilateral cooperation through practical steps".

China's Ambassador to Australia, Zhang Junsai, whom I again acknowledge, said on 3 September, "we should follow the principles of mutual respect, equality and mutual benefit, seek common ground while shelving differences…".

Australia agrees with this sentiment.

The challenge, as always, is in managing aspects of the relationship where our interests, values or concerns pull in contrary directions.

There will be tensions and difficulties from time to time.

These will arise whether Australia or China or both like it or not.

One such issue is the detention of Stern Hu.

This is primarily now a consular case, but it inevitably raised questions for Australian and other international companies doing business in China.

Australia has asked that the case be dealt with in an expeditious manner, consistent with Chinese law and procedures.

In accordance with our bilateral consular agreement, Australian officials have undertaken five consular visits to Mr Hu.

Another prominent issue has been the visit of Rebiya Kadeer to Australia recently.

This was a private visit, yet very controversial from China's perspective.

The Australian Government explained that we fully understood China's concerns over the recent violence in Xinjiang, and threats to its territorial integrity.

We also made clear the fact of Ms Kadeer's visit did not imply endorsement of her political views.

There were also controversies about the Defence White Paper, Chinese foreign investment and Australia's comments on human rights in China.

Some of the commentary on this debate has been ill-founded, but differing views on some issues cannot neither be denied or wished away.

The real question is how to deal with them when they do occur.

Like so much in life or in foreign policy, it is often not what happens but how we respond to what happens that is essential.

Sometimes these issues are played out in private. More regularly, and often unfortunately from both Australia's and China's perspective, they are played out in public.

When it is most effective, Australia's concerns are raised in private in a direct fashion.

Whenever it is appropriate to do so, the Australian Government will express its positions publicly.

Often this will occur because of Australian media interest and the need to respond to such interest in a society like Australia's.

Over time there can be a process of adjustment when the interests of each side do not coincide.

At others, we will simply agree to disagree.

Australia is clear-eyed, not starry-eyed, in its assessment of China and its view of the bilateral relationship.

We recognise the significant economic and social progress that has been made in China on many fronts, and look forward to its continuation.

At the same time, we recognise the challenges that lie ahead for China's development, including environmental and population pressures, and other areas of interest to the Australian community, such as strengthening the rule of law and protection of human rights.

We therefore welcome the increased high-level engagement and cooperation that is taking place at a political level, as well as the growing interdependence of our two economies.

We also welcome the burgeoning contacts between our peoples, and the benefits these bring to our society.

We welcome the opportunities to work constructively with China on issues of regional and international importance.

We look forward with confidence to China's further development and full participation in the global community.

We are optimistic that China will emerge into a "harmonious world" as a "responsible stakeholder".

Prime Minister Rudd last year in Beijing explored the possibility of a synthesis between the concepts of a "harmonious world", which China has used to describe its own development, and the "responsible stakeholder", as articulated by former US Deputy Secretary of State Bob Zoellick.

As the Prime Minister said then:

The idea of a "harmonious world" depends on China being a participant in the world order and, along with others, acting in accordance with the rules of that order.

Failing this, "harmony" is impossible to achieve.

"Responsible stakeholder" contains the same idea at its core – China working to maintain and develop the global and regional rules-based order.

Australia is working with others, including China, to build a future for the Asia-Pacific where dialogue and cooperation become the established norms and default responses.

Future directions

Let me touch on some future directions for our relationship.

One is to further develop our official-level contacts, in order to establish a greater degree of familiarity and pave the way for even better cooperation.

Since coming into office, the Government has upgraded our dialogue and engagement with China.

I have already mentioned the ministerial-level dialogue on climate change. On the strategic front, we have also made progress.

In February 2008 in Canberra, I hosted the inaugural Ministerial-level Strategic Dialogue with my counterpart, Chinese Foreign Minister Yang Jiechi.

This year I went to Beijing to conduct the second Strategic Dialogue.

Our Defence Dialogue has also been upgraded, to the level of Secretary of the Department of Defence and Chief of the Defence Force.

The most recent round took place during the visit of China's Chief of General Staff, General Chen Bingde who was in Canberra just ten days ago and met the Prime Minister and Minister for Defence Faulkner.

Australia is willing to increase defence engagement with China, through training exchanges and senior level dialogue.

This is an area in which we look to enhance opportunities for confidence-building.

We also see potential to engage more deeply with China on challenges to the nuclear non-proliferation regime and to broaden practical cooperation in areas such as humanitarian assistance and disaster relief, peacekeeping, counter-terrorism and maritime security.

Consistent with this theme, the Department of Foreign Affairs and Trade will shortly inaugurate policy planning talks with China's Foreign Ministry.

We see it as vital to engage with each other on long-term foreign policy challenges beyond the day-to-day management of the bilateral relationship.

Another task is to develop the structure of our economic partnership to meet the challenges that lie ahead.

That is why we are continuing to push for a comprehensive Free Trade Agreement (FTA) with China.

The FTA negotiations with China have not been easy, particularly in key market access areas.

Australia goes into FTA negotiations with ambition and high standards for liberalisation.

There would be clear commercial benefits for both countries from a comprehensive and high quality Free Trade Agreement.

Our officials continue to work away at this challenging agenda.

A further area to develop is enhanced people-to-people contact. Australia and China have developed a wide variety of links, but we can engage more effectively with a country whose population is 60 times the size of ours.

We need to take full advantage of all the opportunities we can to promote a deeper understanding of Australia in China.

That is why Australia will participate in the Shanghai World Expo 2010.

And that is why the Government continues to support the activities of the Australia-China Council, which for over 30 years has been promoting people-to-people links between our two countries.

There is also a growing need to raise the level of China skills and China literacy in Australia.

This is why Mandarin is one of the four priority languages in the Government's National Asian Languages Studies in Schools Program (NALSSP), which began operation in July this year.

There is ample scope for us to do more.

I am attracted to the idea of developing an informal one and a half track dialogue, like those we have with other important partners like the United States and New Zealand, which would bring together key people from both sides to forge deeper connections for the future.

A number of interested groups in Australia are already contemplating such an idea, which indicates there is a recognised gap that needs filling.

Given the institutional structure in China and the priority we want to give to this bilateral relationship, this is an initiative which the Australian Government should, at least in the first instance, sponsor.

I have asked the Department of Foreign Affairs and Trade to develop options which will shortly be canvassed with interested groups both in Australia as well as in China.

Conclusion

A productive relationship with China, based on mutual interest and mutual respect, is unambiguously in Australia's national interest.

Both sides have much to gain from this growing relationship.

There is much work ahead of us if we are to make the most of our economic complementarities and shared interests.

Australia will continue to give priority to developing two-way trade and investment in ways which benefit both countries, both peoples and both economies.

We will work hard to give greater depth to the important cultural and education links that will promote greater understanding and good will.

We will continue to pursue constructive engagement with China on significant regional and global issues.

We will continue to deal with inevitable areas of difference with China in a responsible and straightforward manner.

And above all, Australia's policies towards China will continue to be constructive, patient and forward-looking, informed by both our long-term strategic interests and a growing sense of confidence and optimism about this, the Asia-Pacific Century.